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SEC drops some claims against ex-Thornburg Mortgage executives

The U.S. Securities and Exchange Commission logo adorns an office door at the SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst
(Copyright Reuters 2016)

The U.S. Securities and Exchange Commission has dropped several claims against two former executives at now-defunct home lender Thornburg Mortgage Inc in a lawsuit brought in the wake of the 2008 financial crisis.

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The SEC filed papers on Friday in federal court in Albuquerque, New Mexico, saying it would drop three out of five remaining civil claims against Thornburg's former Chief Executive Officer Larry Goldstone and former Chief Financial Officer Clarence Simmons.

The SEC also said it would no longer pursue a claim that the defendants defrauded investors by overstating Thornburg's income by more than $400 million and falsely reporting a profit rather than a loss for the fourth quarter in its 2007 annual report.

The decision came after a federal jury in July returned a mixed verdict in the case, finding Goldstone and Simmons not liable on five of 10 counts. The jury deadlocked on the remaining claims, and retrial on those is set for Feb. 21.

Randall Lee, a lawyer for Goldstone and Simmons, on Monday called the decision by the SEC to seek a retrial on the two remaining claims "inexplicable," given it had dropped its central allegation that the defendants overstated Thornburg's income.

"It's difficult to fathom why they want to proceed to retrial on lesser charges," he said.

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The SEC did not immediately respond to a request for comment.

The SEC filed the lawsuit in 2012, accusing Goldstone, Simmons and former Thornburg Chief Accounting Officer Jane Starrett of hiding the company's fast-deteriorating financial condition at the onset of the financial crisis.

Thornburg, which specialized in making "jumbo" home loans larger than $417,000 to borrowers with good credit, filed for bankruptcy in May 2009.

Starrett agreed in May to pay $25,000 to settle the lawsuit without admitting or denying the allegations.

Goldstone continues to face a claim based on statements he made after Thornburg's annual report was filed.

Both Goldstone and Simmons also face a claim that they misrepresented or omitted facts to the company's auditors. They deny wrongdoing.

The case is Securities and Exchange Commission v. Goldstone et al, U.S. District Court, District of New Mexico, No. 12-00257.